Many airline CIOs are tasked with replacing aging legacy systems and implementing efficient IT infrastructures and effective applications that can deliver an edge in a highly competitive business environment. Innovative IT outsourcing initiatives can address this challenge, but many airlines have failed to integrate supplier expertise and achieve real value from or fresh ideas from their relationships.
Rather than leveraging the skills and capabilities of third parties, CIOs find that their sourcing initiatives are often limited to staff augmentation, with suppliers essentially filling the role of order-takers. For airlines that are able to bring in relevant domain expertise, either through a third party or a captive operation, managing price often becomes an issue.
For their part, outsourcers offer technical expertise but often lack the understanding of business issues needed to offer a compelling solution that addresses a client’s hot buttons.
Ultimately, clients struggle to articulate their requirements and providers struggle to articulate their value proposition – the result is a lose/lose proposition.
Part of the problem may lie in the manner in which airline CIOs define their objectives and select service providers. In a traditional RFP, clients articulate a highly specific set of requirements, and vendors respond by filling in the prescribed blanks. Increasingly, all parties are finding that this approach can stifle innovation, as it essentially defines the solution to the problem rather than soliciting new ideas.
An emerging alternative – the “Request for Solution” – takes a more open-ended approach and invites providers to show their creativity. Consider this analogy: A family of four asks a travel agent to find the cheapest package for a family of four to fly from New York to a hotel room within five miles of Disneyworld for five days at the end of June. This is the basic dynamic that characterizes the traditional RFP process.
Alternatively, a family provides the travel agent with a set of broad criteria: a five-night vacation that includes a mix of activities for a budget of $4000 or less. In this scenario, the agent has the leeway to be creative and offer a variety of solutions. By inviting the travel agent to be creative and bring their expertise to bear, this approach more closely resembles the RFS process.
A similar re-think is taking place with regard to contracting. Rather than a highly detailed, voluminous document that take months to prepare, review and complete, clients are seeking more flexible approaches that allow both parties to test the waters and develop the relationship further if it’s of mutual benefit. In describing this concept of “Evolutionary Contracting,” my ISG colleague Tom Young challenges the industry bromide that outsourcing relationships are like marriage, and that both require commitment over the long term. Tom argues that, rather than viewing their service provider contracts as wedding vows, clients should think of outsourcing as more of a dating game.
We are by no means suggesting that traditional outsourcing RFPs and contracts are becoming irrelevant. Indeed, they remain essential to initiatives aimed at optimizing existing operational models. But we are seeing more and more situations where clients have transformational requirements and face problems that have more than one right answer. This is certainly true in the airline industry, where CIOs struggle to make the most of opportunities presented by mobility, big data and other emerging technologies.
Perhaps it’s time to give the RFS and Evolutionary Contracting a closer look.